Euro Exchange Rate: Crunch time for the Euro

Continually gloomy economic data, rising tensions among the populace and signs of recovery nowhere in sight, the Eurozone is set to face a decisive period over the next few months.

According to Sean Corrigan the chief investment strategist at Diapason Commodities Management, there is a ‘disconnect’ in the European financial markets. A disconnect that was created when European Central Bank President Mario Draghi told the world that he do whatever it takes to save the Eurozone.

“Markets have been happy to run with the confidence trick, but Spain gets worse week by week with its property market down by 35% from the top, joblessness gets worse every week and the Greeks have just shut down their TV services because they can’t pay for it” Corrigan told CNBC.

According to Corrigan even the easing of harsh austerity measures on the battered economies of Southern Europe could renew tension in the markets. Italy just this week announced that it would not be introducing further fiscal tightening.

The International Monetary Fund added to the grim picture after it said that Portugal, a country that has rigidly stuck to austerity measures, does not have much hope of making a recovery. The IMF reported on Thursday that the country’s outlook is very fragile despite its meeting the targets of its €78 billion bailout. Greece meanwhile was downgraded from a developed economy to an emerging market economy an event unprecedented in modern Europe.

Adding to the miserable picture was today’s data that showed that the number of European citizens in work fell for a seventh consecutive quarter. Over 19.4 million people in the Eurozone are now out of work.

Economists are arguing that data in the second half of the year will prove vital for the Eurozone. For months economists and governments have been saying that the region would begin to show signs of growth in the latter part of the year.

The chief international economist at Barclays Julian Callow is optimistic that the green shoots of recovery will emerge in the second quarter of 2013 and that Draghi’s pledge to do ‘whatever it takes’ will bear fruit.

“I think the Euro zone has learned a lot from previous crises and there will be a great concern to avoid the depths of the crisis that we’ve seen,” Julian Callow told CNBC on Friday. “There is a risk of tension and markets are certainly going to be very thin and illiquid over summer so there’s a danger that market sentiment could get knocked, but overall Europe is in a much more efficient crisis management mode so you can expect the fire fighting to come out if the conditions deteriorate very seriously from here.”

On the other hand, Ian Bremmer, president of the global political risk consultancy Eurasia Group is pessimistic about the prospects of a turnaround.

“Certainly, some of these countries have hit the bottom but there’s no reason why you’re going to see major economic growth in any of these European countries soon,” he said.

Time will tell as to who will be proven correct. GDP data for the second quarter of the year will prove crucial to giving a sense of direction for the Eurozone. Second quarter GDP will be released in August.

Current Euro (EUR) Exchange Rates

The Euro/US Dollar Exchange Rate is currently in the region of: 1.3315

The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8508

The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.3837

The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.6444

The US Dollar/Euro Exchange Rate is currently in the region of: 0.7500

The Pound Sterling /Euro Exchange Rate is currently in the region of: 1.1741

The Australian Dollar/Euro Exchange Rate is currently in the region of: 0.7199

The New Zealand Dollar/Euro Exchange Rate is currently in the region of: 0.6044